Home Daily Commentaries NZD gives up 4 week high as RBNZ cuts rates

NZD gives up 4 week high as RBNZ cuts rates

Matt Richardson
Written by
Matt Richardson

Matt Richardson

OFXpert

Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange.

| Thursday 15 August, 2024

Daily Currency Update

The New Zealand dollar tracked lower through trade on Wednesday in response to the RBNZ’s decision to cut the benchmark cash rate. Policymakers lowered the Official Cash Rate by 25 basis points to 5.25%, noting inflation is returning to target and as activity weakens it is now appropriate to loosen monetary policy conditions. Furthermore, RBNZ modelling suggest policymakers will extend the easing cycle by issuing to additional rate cuts at both remaining policy meetings this year. Markets were divided as to whether the RBNZ would pull the trigger on rates prompting a larger reaction across currency markets in the wake of the announcement. Having edged toward a 4-week high leading into the meeting, the NZD tumbled back below US$0.6020 and traded sideways through much of the overnight session, edging below US$0.60 at open this morning.

With little reaction to US CPI data, our attentions now turns to domestic price indicators as potential markers for Q3 inflation while Australian employment data, Chinese data and US retails rales and Jobless claims dominate the offshore ticket.

Key Movers

Price action across global markets was mixed following the latest US CPI inflation print. Headline and core inflation printed in line with expectations and slowed to their slowest annual pace since 2021. Inflation in the US remains on a downward trend and when coupled with a cooling labour market, gives the Fed license to being cutting rates in September. The question now is, how aggressive will the Fed be? Markets are pricing a 40% chance of a 50-point cut and much will come down to August payrolls data. Further softening in the labour market will only amplify recession fears and elevate calls for the Fed to act quickly. With FOMC policy expectations central to near term market direction, we can expect ample volatility through the coming weeks as markets respond to key macro-economic indicators. Our attentions today shift to retail sales and jobless claims.

In other news, UK inflation was softer than expected, prompting a downward correction in UK gilt yields as markets firm bets for Bank of England policy easing and a rate cut in November. With the GBP lower, the euro outperformed, edging above 1.10 and holding gains through the open this morning.

Expected Ranges

  • NZD/USD: 0.5950 - 0.6080 ▼
  • NZD/EUR: 0.5420 - 0.5520 ▼
  • GBP/NZD: 2.1150 - 2.1550 ▲
  • NZD/AUD: 0.9020 - 0.9220 ▼
  • NZD/CAD: 0.8180 - 0.8330 ▼

Written by

Matt Richardson

OFXpert

As a Senior Corporate Client Manager, Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange. Matt has clients who he has been working with for over a decade, a testament to his knowledge and dedication in the field. Matt is also a regular contributor on Ausbiz, offering clear and precise updates on currency market trends, showcasing his ability to interpret complex financial data into actionable insights.